Tuesday, December 23, 2008

In Other News...

WITH 2009 shaping up to be a 'difficult year', the Government will try to moderate public transport costs next year, said Transport Minister Raymond Lim yesterday.

The Public Transport Council (PTC) will continue to take economic conditions into account in its annual assessment of bus and train fares, due in the second half of next year, he added.

But he tempered expectations that falling oil prices will translate into a similar drop in fares, saying that there is no direct correlation between the two.

If there were, public transport fares would have shot up 40 per cent between last year and earlier this year on the back of a spike in oil prices over the period, but did not, he said.

Mr Lim was speaking at a dialogue with about 300 MacPherson residents. He was accompanied by Member of Parliament for MacPherson Matthias Yao.

In the morning, he toured the constituency, distributing food rations, chatting with residents and participating in a ceremony to lock in a time capsule containing items such as community photos.

This was followed by the hour-long dialogue where the minister answered six questions. It was clear that concerns about the cost of living amid a recession were on the top of most minds.

Mr Gillian Teo, 54, a business development manager, expressed hope that there would not be any public transport fare increases next year, as retrenchments mount. Mr Lim responded: 'I can understand his concern. It's going to be a difficult year next year, so we'll try our best if possible to moderate the costs.

The PTC, which regulates public transport fares, will have to 'sit down' and weigh various factors including the impact on commuters, on transport operators and the economic conditions. The last round of fare adjustments was in September, when it approved an overall net hike of 0.7 per cent in bus and train fares.

But the minister also dispelled the hope expressed in a question that he said many have put to him: With oil prices now plummeting, why not fares too? Oil prices have fallen to about US$33 a barrel from a record high of US$147.27 in July.

'That's a fair question,' he said. 'The answer is that public transport fares are not directly linked to oil prices.'

Instead, they are tied to what Mr Lim called national factors: the level of inflation and average wage increases.

He pointed out that 'from 2007 to this year... oil prices went up 40 per cent, but fares went up just 0.7 per cent'.

Another resident asked if commuters should be reimbursed for the higher transport fares that they paid when oil prices were high, and if the transport companies were making 'a lot of profits'.

Mr Lim urged his audience to look at the 'big picture'. He said: 'We don't want the companies to be making excessive profits, but that's different from saying that they cannot make profits at all.'

For instance, over the next three years, it will cost between $500 million and $600 million to bring in new buses. 'Therefore the companies need to build up their reserves to purchase these...and maintain standards.'

The minister also explained that while the economy may be slowing down, the prices of products and services will not necessarily fall in tandem.

One resident asked if the cost of living would return to the levels seen prior to the spiralling oil prices this year.

Mr Lim noted that the overall price level - as measured by the consumer price index - may fall, as oil prices drop. 'But does it mean that all prices will fall? No, because different products and services will have different supply and demand.'

As an example, he cited egg prices, which went up after eggs from China were found to contain melamine and buyers turned to Malaysia. But news reports said there is also a shortage in Malaysia because the high price of corn early this year led to farmers rearing fewer chicks.

Mr Lim also explained that subsidising fares or giving free bus rides will only mean taxpayers picking up the tab.

It costs $1.2 billion a year to run the buses and trains. This is equivalent to a 1.5 percentage point increase in the goods and services tax.

'So, now it is 7 per cent. Do you want the GST to go up to 8.5 per cent to run a completely free bus and train system?'

The minister's assurance that the Government would try to contain transport costs gave some comfort to Mr Teo, a grassroots leader.

'I know it's very hard for them to reduce fares, so I just hope that they will not increase them again. The fares now are already so high. If they go up, the poor will be very badly affected.'